What stock market times!

While fears of a global recession still dominated the stock markets last week, the mood has recently been significantly more optimistic: On Friday, the Dax approached the weekend with an increase of more than 2 percent and at times reached its highest level in five weeks.

The American index Dow Jones was even more than 4 percent up on a weekly basis - and the Nasdaq 100 technology index, which had recently been badly hit, at least managed a weekly increase of 3.7 percent.

The analysts at Landesbank Hessen-Thüringen spoke of a "change in mood".

“Fed seems to be acting with a sense of proportion”

Christian Siedenbiedel

Editor in Business.

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The turnaround in interest rates and inflation remain key issues for the financial markets: the minutes of the most recent meeting of the American Federal Reserve (Fed) were interpreted as a sign that the central bank is continuing its monetary policy normalization course at the current pace and at least not unexpectedly accelerating further.

"Investors are pleased that the Fed seems to be acting with a sense of proportion, despite all its aggressiveness," commented the analysts at Bankhaus Metzler.

"The euro area, on the other hand, is still busy processing the (too) late turnaround by the ECB," say the analysts at Helaba.

European bank stocks gain significantly

At the beginning of the week, ECB President Christine Lagarde described the planned path of monetary policy normalization much more specifically than before - with an initial interest rate hike in July and an end to negative interest rates or even a slightly positive interest rate in September.

At the end of the week, Bundesbank President Joachim Nagel reiterated in an interview that the first rate hike should come in July, with others to follow “in the second half of the year”.

No wonder bank stocks were among the weekly winners: banks often benefit from rising interest rates.

Commerzbank recorded a price increase of almost 12 percent, Deutsche Bank more than 10 percent.

Inflation numbers for May next week

In the coming week, the inflation figures for May should be awaited with interest.

The Federal Statistical Office wants to publish the value for Germany on Monday, and the European statistical office Eurostat the value for the euro area as a whole on Tuesday.

While there has been talk up to now that inflation could reach 8 percent in the summer, there is currently speculation that this value could have been reached in the month just ended.

In any case, Commerzbank chief economist Jörg Krämer expects 8.0 percent inflation in May for the euro area: "The underlying inflationary pressure has increased again," he says.

Producer prices in the manufacturing sector in Germany have recently risen by more than 33 percent.

But something is also happening with wages: after collective wages in the euro area rose by only 1.6 percent in the fourth quarter of 2021, they increased by 2.8 percent in the first quarter of this year.

In addition, the trade unions in Germany, for example, are demanding wage increases of 6 to 7.5 percent for a period of twelve months for the upcoming negotiations.

"Inflation is increasingly affecting wages," believes Krämer: "The risk of a wage-price spiral is increasing."

Karsten Junius from Bank J. Safra Sarasin is a bit more cautious.

He expects 7.8 percent inflation in May in the euro zone, the consensus of the analysts at the Bloomberg news service is 7.7 percent.

Holger Schmieding, chief economist at the Hamburg banking house Berenberg, expects inflation of “about 8 percent” both in the euro area and in Germany.

In May, the price of oil rose again somewhat – in addition, the high prices for natural gas and grain, for example, reached consumers with a time lag.

The economist is convinced that the supply chains, which have once again been severely disrupted by Chinese lockdowns, are also causing cost pressure: "The tank discount and other interventions should then ensure that the rate falls somewhat in June."